Salzer Electronics hosted a
conference call on May 25, 2023. In the conference call the company was
represented by Rajesh Doraiswamy, Joint Managing Director.
Key takeaways of the call
Q4FY23 performance has been in
line with our expectations. All
divisions witnessed good growth during the mainly
due to better market conditions in India and abroad. Witnessing a substantially
higher demand in many key products from various products under Industrial Switchgear
division.
Raw material prices have begun to
stabilize and are seeing the benefits of
the price hikes by the company in the
form of better gross margins year on year.
Wires and cables division grew
45% sequentially during the quarter, accounting for 41% of current quarter revenue. In fact, after a
long slowdown the demand for agrimarket cables have picked up in Q4FY23. See
similar demand growth going forward for agri cables.
Exports contributed about 26% of
revenues this year, mainly on account of higher sales in the America’s
including South American countries like Brazil, Argentina and Chile. New products usa and Australia started giving
revenue from march 2023 onwards.
Based on domestic and export
outlook, the company is cautiously optimistic about the overall business
performance. Expect 20% growth in
revenue for FY24 on the strength of
strong product offerings and brand postion in the market. The company expects a bottom line growth of
about 25%. Expect 10-10.5% of EBITDA margin in FY24. Atleast 100 bps improvement in margin for
fy24 across all divisions.
Switchgears business the company
used to have and EBITDA margin of about 13-14% and that dropped to about 9.5%
in FY22 due to RM price fluctuation and improved to stand at 11.7% as of today
with stabilization in RM price and price increase.
Within switchgears the margin of
each product varies some having a margin of 11% and some at 17%. The margin of rotary camp switches, 3 phase transformers is about 11-12% and wire harness is also low. Similarly for supply to certain sector the
company has to be competitive and so it
will trade off margin for business. If
more transformer contribution with in switchgear the margin will be lower. However
the company works to increase atleast 100 bps increase in EBITDA margin of
switchgears. The dry type transformer
business continues to grow at 35%. The
14% margin was achieved when transformer is a one of top selling products
within switchgears but with switchgears grown well the company expects to touch
a peak margin of about 13-13.5% next fiscal with about 100 bps improvement in
margin every year.
EBITDA margin hit by 200 bps due
to product mix with Q4FY23 having higher revenue contribution from W&C and
transformers.
Contactor, the product is
expected to fetch a revenue of about USD 1-2 mln in revenue in USA for current
fiscal and it has the potential to go as far as about USD 20-25 million.
EV Charger will be launching in
Q2FY24 for sales. Expect a revenue of
about Rs 35-40 crore in FY25 for EV chargers but the company is not factoring
in any significant revenue and will be supplying some to the JV partner for
their global requirement.
Kaycee sales up 42% to 42.3 crore
and PAT up 87% to Rs 3.5 ccrore for fy23. Currently salzer is holding 74%
stake in Kaycee . Synergy and joint go to market strategy
turned Kaycee profitable.
Dry type transformers grew 300%
in Q4FY23 and 180% for fy23.
Solar, wind and hydro power
opened up new opportunities for switchgears and cables. The company is tier 2 supplier to Solar
Inverters. Supplies to solar industry include
3phase transformers and wire harness.
The company is also supplying to Wind and hydro OEMs. The company is
seeing opening up of new opportunities. Half of growth of 3phase transformers
in FY23 has comes from solar.
The company is setting up a plant
at Hosur, a strategic location for future growth. The capex in Hosur plant in
FY24 is about Rs 14-15 crore. Similarly the company is EV Charging JV will
require an capex of about Rs 12-13 crore in next couple of years. The company use its products as components in
EV Charging products.
Switchgears the EBITDA margin for
FY23 is about 11.7%; for Wires & Cables it is about 7% and for building it
is about 3%.
Wire Harness revenue in FY23 was
about Rs 70 crore and wire harness are sold to OEMs. But W&C are raw copper
W&C revenue in FY23 was about Rs 390 crore and it is sold to retail
customers and OEMS and it is the only B2C business of the company.
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